tapebrief

PPG · Q2 2025 Earnings

Cautious

PPG Industries

Reported July 29, 2025

30-second summary

Revenue fell 1% YoY to $4.20B on just 2% organic growth, with Performance Coatings (+7%, 25.7% EBITDA margin) masking a 5% decline in Architectural and a 5% headline decline in Industrial that was entirely divestiture-driven (organic volumes flat). Non-GAAP EPS landed at $2.22 and management reaffirmed — did not raise — the $7.75–$8.05 FY25 EPS range, while explicitly leaning on a second-half volume acceleration that has yet to materialize. The setup is a show-me story: Mexico project work, refinish normalization, and self-help cost actions all need to land in H2 to hit the guide.

Headline numbers

EPS

Q2 FY2025

$2.22

Revenue

Q2 FY2025

$4.20B

-1.0% YoY

Operating margin

Q2 FY2025

17.7%

Key financials

Q2 FY2025
MetricQ2 FY2025YoY
Revenue$4.20B-1.0%
EPS$2.22—
Operating margin17.7%—

Guidance

Prior quarter data unavailable — comparison not possible.

Segment KPIs

Q2 FY2025
SegmentQ2 FY2025YoY
Global Architectural Coatings$1.018B-5.0%
Performance Coatings$1.512B+7.0%
Industrial Coatings$1.665B-5.0%
Performance Coatings Organic Sales Growth6%—
Industrial Coatings Sales Volume Growth0%—

Other KPIs

Q2 FY2025
SegmentQ2 FY2025
Organic Sales Growth2%
Segment EBITDA Margin20.3%
Performance Coatings Segment EBITDA Margin25.7%
Global Architectural Coatings Segment EBITDA Margin18.4%
Industrial Coatings Segment EBITDA Margin16.6%
Aerospace Coatings Order Backlog$300 million

Management tone

Only opening remarks and Q&A are available — no multi-quarter transcript archive yet for arc construction. Read with that caveat.

Management's Q&A posture was confident in mechanism but conservative in magnitude. On Mexico, CEO Tim Knavish framed H2 recovery as "projects in flight being dialed back rather than stopped" with completion expected in the back half — but the guide only assumes Mexico "up modestly to mid single digits," not a sharp snap-back. That gap between qualitative bullishness ("flood gates" language from ground contacts on a tariff agreement) and quantitative caution in the actual guide is the tell: management sees upside optionality but isn't underwriting it.

On refinish, the H2 cadence was unusually specific — Q3 soft on order-pattern normalization, Q4 more normalized, industry-level claims recovery not until 2026. That's a 12-to-18-month patience ask on a segment investors have been waiting on for multiple quarters.

The architectural margin miss drew the sharpest analyst pressure (BMO's McNulty led with it). The four-part explanation — FX, Mexico B2B mix, Australia disruption, divestiture — was coherent but cumulative, which is rarely a clean story.

Q&A highlights

John McNulty · BMO

Why did architectural coatings margins underperform relative to sales weakness? Specific concerns about Europe recovery trajectory and margin impact from volume declines.

Tim explained margin pressure came from FX imbalance between Europe and Mexico, Mexico B2B volumes still down (high-margin business), internal supply chain disruption in Australia, and divestiture impact. Europe showed unexpected Eastern Europe weakness despite Nordics and UK strength. Margins expected to improve with volume recovery and continued cost actions.

Mexico architectural: down low single digits in Q1, up positive low single digits in Q2Q2 retail recovery led growth in MexicoAustralia supply chain disruption behind company nowDivestiture was above segment margin

Michael Sissons · Wells Fargo

Refinish segment down low single digits despite flat first-half performance. What is outlook for next quarters and into 2026? How sustainable is double-digit protective & marine growth?

Refinish flat through first half despite high single-digit collision claims decline, benefiting from share gains and distributor patterns. Q3 expected soft due to order pattern normalization, Q4 more normalized. Expects industry recovery of claims and body shop work likely not until 2026. PMC showing nine consecutive quarters of growth driven by new fire protection and marine aftermarket technologies expected to continue through 2026.

Refinish flat year-to-date despite high single-digit collision claims declineQ3 refinish expected soft, Q4 more normalizedRefinish expects low single-digit volume decline in normalized model with pricing up couple pointsPMC: 9 consecutive quarters of positive YoY sales volume growth

Derry Fisher · Goldman Sachs

Why are raw materials showing more inflation for PPG than peers? Is it footprint differences or purchasing differences?

Two key differentiators: (1) PPG's large Mexico presence requires dollar-based purchases, creating FX impact on raw material costs; (2) PPG buys significant epoxy (up pre-April due to early tariffs) unlike pure architectural competitors. PPG able to price through Mexico inflation without bottom-line impact similar to other Latin America businesses.

Mexico FX impact on dollar-denominated raw material purchasesEpoxy pricing up due to pre-April 2nd tariffsCompany pricing through Mexico inflation successfully

Vincent Andrews · Morgan Stanley

What confidence level for Mexico architectural project spending recovery in H2? What tariff assumptions built into guidance?

Tim cited projects already in flight being dialed back rather than stopped, with completion expected in H2. High confidence from ground contacts that government tariff agreement would accelerate spending. Mexico's proximity and workforce strength provide structural advantage even with tariffs. Guidance assumes Mexico up modestly to mid single digits in H2 (not dramatic step-up), with continued retail growth and sequential project improvement.

Q2 Mexico organic growth low single digits (retail up, projects down)H2 guidance: Mexico business up modestly to mid single digitsSequential improvement Q2 to H2 expectedProjects in flight, not complete stops

What to watch into next quarter

Mexico architectural project ramp — H2 guidance assumes "up modestly to mid single digits." Q3 print needs to show sequential acceleration from Q2's low-single-digit organic. If retail momentum holds but B2B projects stay deferred, the FY EPS guide is at risk.

Industrial Coatings margin trajectory — 16.6% EBITDA margin is the floor of the segment portfolio. Watch whether the flat-to-improving volume trend translates into margin recovery from cost actions and share-gain leverage, or whether index-based price compression continues.

Refinish Q3 softness magnitude — management telegraphed a soft Q3 from order-pattern normalization. The question is whether "soft" means flat or down mid-single-digits — the latter would compress the Performance Coatings growth narrative.

FY EPS guide revision — reaffirmed at $7.75–$8.05 this quarter despite H1 mixed results. A Q3 raise would validate the H2 acceleration thesis; another reaffirmation would push management toward the low end.

Eastern Europe demand signal — the Q2 negative surprise was explicitly called out. Whether this stabilizes or deteriorates further is the swing factor in Architectural beyond Mexico.

Sources

  1. PPG Q2 2025 Earnings Release — https://www.sec.gov/Archives/edgar/data/79879/000007987925000218/exhibit99-2q2025earningsre.htm
  2. PPG Q2 2025 Earnings Call Q&A (excerpts from extraction)

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